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Interstate closing to hurt toll road

GREENVILLE - The unprecedented closure next week of Interstate 385 is likely to further dent traffic on the Southern Connector toll road just as the troubled highway flirts with default on a bond payment next month.

How much traffic and revenue the Connector will lose remains to be seen when interstate travelers begin to pick from alternate routes Monday. That's when 15 miles of northbound I-385 will close for at least eight months.

"Definitely, there is going to be some impact to the Connector," said general manager Pete Femia, adding that some of the directors of the public-private highway believe the fallout could be "significant."

Taxpayers own the highway, which runs from I-385 near Mauldin to I-85 south of Greenville, though bond documents say they aren't at risk in case of default. Instead, bondholders have the right to make changes to highway management while the state could ultimately take over if the road goes bust.

Femia said he expects the highway to miss a bond payment in January, putting the fate of management in the hands of bondholders after previous attempts failed to restructure the debt.

He said he doesn't believe bondholders have a beef with management, but that the question is how to increase traffic.

That makes the I-385 closure the last thing he needs, though Femia said he hopes GPS-equipped drivers headed to west Greenville, Anderson or Atlanta will be able to navigate around the construction without dropping the toll road leg of their trip.

"I think it's going to be a major inconvenience for them," he said.

DECISION CRITICIZED

Critics have blasted the state Department of Transportation's decision to close I-385 - the first interstate closure in South Carolina history, and Greenville's main artery to the rest of the state - without consulting Greenville residents and weighing the ripple effects on the Upstate economy and secondary roads that could crumble under rerouted traffic.

Agency officials have said the decision to shut off northbound travel while they complete $60.9 million in bridge work and resurfacing was based on safety concerns, time savings and a price cut of as much as $30 million.

The closure will stretch from where I-385 splits with I-26 to Gray Court in Laurens County. DOT officials have said they now believe they should have done more to include Greenville officials in the process - but that the decision was the correct one.

An average of 8,000 cars a day that normally pass through Laurens County will have to find another northbound route, and about half of them travel into Greenville County, according to the transportation department.

The toll road doesn't report individual vehicles, but has reported as many as 22,000 and as few as 9,000 daily transactions in recent weeks. A car registers a transaction each time it passes through a toll plaza, with full-length trips triggering two transactions and short trips counting as one.

Regardless of the impact, Femia said he's helpless to do anything about it. The same goes for the pending default, he said, which leaves toll road changes up to the trustee for investors.

Attempts to reach some investors Tuesday were unsuccessful.

State Sen. Larry Grooms, a candidate for governor who chairs the Senate Transportation Committee, has said he's concerned that if the toll road bonds become worthless it could hinder the state's efforts to borrow for another public-private project.

REVENUE DECLINE

The Connector, which raised toll rates earlier this year to $2.50 for a car to travel the highway's full length, reported in June total assets of $159.6 million against total liabilities of more than $322 million, including $304 million in bond obligations.

Highway figures show the toll road had collected nearly $4.8 million in 2009 traffic revenue through November, a decline of about $30,000 from the same period a year earlier and less than a third of the nearly $16 million in 2009 revenue the Connector 2000 Association initially projected in 1998.

Annual operating expenses are about $3 million, Femia said. Bond payments this year total more than $10.7 million, bond documents show.

The Connector 2000 Association had previously named Goldman Sachs as a "special financial consultant" to explore stretching bond payments over a longer period of time. State Secretary of Transportation Buck Limehouse Jr. had said new investors could take over the license to operate the highway and collect tolls as part of a "concession" agreement.

Femia declined to discuss the specifics of the talks, or to say why they didn't produce a restructuring agreement.

The toll road has already been in "technical default," and Limehouse said in a June letter that he would extend a 90-day grace period so the highway could work out its financial difficulties, "preferably outside of bankruptcy."

He also said the DOT would give the Connector a 90-day notice before terminating its licensing agreement with the management firm.

Femia said a restructured bond debt remains the goal.

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